- Sterling is underperforming major currencies as weak UK retail sales data strengthens the case for a BoE interest rate cut in February.
- UK monthly retail sales fell by 0.3% in December, despite expectations for strong growth of 0.4%.
- The US dollar rose despite a slight acceleration in the Fed's dovish outlook.
Sterling (GBP) fell sharply against major currencies on Friday after the Office for National Statistics (ONS) reported an unexpected contraction in retail sales in December, another data that reinforced the weak economic outlook. did. Retail sales data, a key indicator of consumer spending, fell 0.3% month-on-month. Economists had expected private consumption to rise 0.4% faster than November's 0.2% rise.
Grocery store sales fell by 1.9% in the month, taking the index level to its lowest level since April 2013, according to the ONS Retail Sales Report. Supermarkets had the largest monthly decline, but sales volumes also fell at specialty food stores (such as butchers). and bakeries), alcohol and tobacco stores (including e-cigarette stores).
Expectations are high that the Bank of England will be forced to cut the rate by 25 basis points (bp) to 4.5% at its February policy meeting due to a decline in consumer spending. Market expectations were already growing that the Bank of England would cut borrowing rates next month as inflation pressures ease and government borrowing costs rise.
December's Consumer Price Index (CPI) report showed a surprising slowdown in headline inflation, with the core index growing at a slower pace than expected.
Meanwhile, the sharp rise in UK government bond yields remains a crucial factor in the need for policy easing. The UK 30-year gold yield rose to 5.48%, the highest level in 26 years. UK gold is weaker as investors become cautious about the economic outlook due to stubborn inflation and the possibility of a trade war with the US under President-elect Donald Trump's administration, assuming a scenario of sharply increasing import tariffs. Yields have risen. That will depress the export sector.
Going forward, the main catalyst for sterling will be labor market data for the three months to November, which will be released on Tuesday. Investors will be paying close attention to employment data to gauge the impact of Chancellor of the Exchequer Rachel Reeves' announcement of an increase in employer contributions to National Insurance (NI) in her first Autumn Budget. .
British pound PRICE today
The table below shows the percentage change of the British Pound (GBP) against major currencies today. The British pound was the strongest against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.04% | 0.30% | 0.26% | 0.14% | 0.19% | 0.16% | 0.05% | |
| EUR | 0.04% | 0.33% | 0.29% | 0.17% | 0.22% | 0.20% | 0.09% | |
| GBP | -0.30% | -0.33% | -0.04% | -0.15% | -0.11% | -0.14% | -0.24% | |
| JPY | -0.26% | -0.29% | 0.04% | -0.11% | -0.07% | -0.10% | -0.20% | |
| CAD | -0.14% | -0.17% | 0.15% | 0.11% | 0.04% | 0.02% | -0.08% | |
| australian dollar | -0.19% | -0.22% | 0.11% | 0.07% | -0.04% | -0.03% | -0.14% | |
| new zealand dollar | -0.16% | -0.20% | 0.14% | 0.10% | -0.02% | 0.03% | -0.10% | |
| swiss franc | -0.05% | -0.09% | 0.24% | 0.20% | 0.08% | 0.14% | 0.10% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select British Pounds from the left column and move along the horizontal line to US Dollars, the percentage change displayed in the box represents GBP (Basic)/USD (Quote).
Daily Digest Market Trends: GBP falls against USD as investors digest slight increase in dovish Fed expectations
- The pound sterling fell to around 1.2160 against the US dollar (USD) on Friday. GBP/USD has fallen sharply due to multiple headwinds, including weak UK retail sales figures and a strong US dollar. The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, has soared above 109.20. The dollar remained largely resilient, even as investors digested some acceleration in the Fed's dovish outlook after weaker-than-expected core consumer price index (CPI) growth in December. I keep it.
- Traders are pricing in at least two 25bps rate cuts this year, with the first expected at the June meeting, according to the CME FedWatch tool. “If we continue to see soft inflation data, as we saw in December, it's hard to think we could see a rate cut in the first half of this year,” Fed President Christopher Waller said in an interview with CNBC on Thursday. It's reasonable.” Waller also held off on expectations that the Fed would cut interest rates in March if inflation continues to rise and the labor market remains strong.
- Investors will now focus on President-elect Donald Trump's economic policy announcements after his inauguration on Monday. Market participants expect President Trump to announce new import tariff plans and personal tax cuts soon after taking office. Scott Bessent, President Trump's nominee for the Treasury Department, said Wednesday there is an urgent need to lower personal taxes to prevent the economy from facing economic disaster.
Technical analysis: GBP resumes downtrend after hitting 10-day EMA
After briefly rebounding to near the 10-day exponential moving average (EMA) of 1.2313 earlier this week, the pound has resumed its decline against the US dollar and is currently trading around 1.2278. The outlook for the GBP/USD pair remains bearish as the 50-day EMA is falling around 1.2552.
The 14-day Relative Strength Index (RSI) remains within the 20.00-40.00 range, suggesting strong bearish momentum.
Looking down, the pair is expected to find support near the October 2023 low of 1.2050. On the upside, Wednesday's high at 1.2306 will be a key resistance.
